The Domino Effect: Unraveling the Consequences of Unethical Business Practices

Ethics is concerned with person’s moral judgment about what is right or wrong. Decisions made in a company, either by an individual or a group of individuals should be guided by the culture of the company. Organizations should develop a culture of moral decision making even though it might mean rejecting the route that will lead the group to massive profits over short periods of time. Enormous consequences can befall a company when it acts in an ethically questionable manner.

The reputation of a company is one of the most significant assets. Many great companies have had their reputations ruined due to shady business practices. McDonald has been a victim of using shady business practices. While is it a global success story, it has received backlash due to its perceived bad ethics in relations to its stakeholders and employees.  In 1972, the founder donated to a campaign for a chance to pay teenage employees 20% less than the federal minimum wage bills (Shabecof, 1972). While the aim was to maximize their profits, this move rubbed the customers the wrong way and led to the loss of valuable patronage.

Decreased number of consumer, in turn, reduces the earnings of the organization. Customers are the most valuable segment of any industry, and unethical dealing can lead to a decrease in the number of consumers. Once Customers are dissatisfied with the products of the company, they become reluctant to purchase some of these products. Public perception of a company drives sales and profits, and hence the company loses its holding against other companies in the same space. 

In extreme misconducts, a legal case is opened towards the company and charges, imprisonments and fines are enacted on the executives or employees. This further tarnished the name of the organization. There is also the loss of the financial feel for corporate misconducts are usually quite large. In the state of Minnesota, CenturyLink, a giant telecommunication company is facing legal battles filed by consumers due to overbilling (Snider, 2017).

Fewer investors are willing to put money into an organization that acts in an ethically questionable manner. A company with a tainted reputation will have a lower stock price if it is publically traded firm, as fewer people are willing to invest in such a company. Investors have a piece of mind when they know their money is being used according to their moral standing.

All these effects lead to a chain reaction that causes a significant loss of value.

For Customers: they are the most affected in case of unethical dealings. In healthcare, it can lead to death or injury. In itself, it can lead to dissatisfaction of the customer and hence decreased purchases. This is a severe drain on the companies bottom-line leading to drop in profits, increased scrutiny, due to increased cynicism, on products and hence lower sales. Customers are happier to make purchases of products that they know have been sources ethically and responsibly.  When a coffee company states that they pick their beans from the suitable plant with no deforestation and pay their labors good wages, this becomes a selling point for the final product.

Companies that have a moral standing are less likely to be caught up with such issues and hence can maintain their reputations which trickle down to more customers and therefore more revenue for the organization.